Algeria ferts industry in chaos on new export authorisation process

14 November 2013 16:55[Source: ICIS news]

LONDON (ICIS)--Algeria's fertilizer industry has been left in "complete chaos" after the government suddenly blocked all ammonia and urea shipments under a controversial new process which requires producers to submit requests for export authorisation in person at government offices, a market source revealed on Thursday.

Just weeks after a long-awaited commissioning of the massive $2bn (€1.48bn) Sorfert plant, traders and buyers wishing to load nitrogen fertilizer cargoes from plants in the North African country have been told they must first seek approval from the Ministry of Energy and the Ministry of Defence.

According to the local market participant, officials in the capital, Algiers, are demanding that details of the buyer, vessel, destination, end-user and purpose are submitted in person before an export application is considered.

The shock move has caused havoc to the industry in the port city of Arzew, where major ammonia producers Fertial and Sorfert frequently load cargoes, as the applications process takes several days to complete and traders are often unsure where exactly they will deliver cargoes they are sold to customers on a spot basis.

Norwegian fertilizer giant Yara International has already had to abandon plans to load a 15,000-tonne cargo on the LPG tanker Nijinsky, with the vessel leaving Algeria last week with her tanks only half full.

"The government has pushed the fertilizer industry into a crazy scenario where no ammonia or urea exports are allowed until a special authorisation process has been successfully completed," said the source. "This involves a file with all the details of the shipment, like buyer, destination and end use, being submitted in person to the Ministry of Energy in Algiers.

"The Energy Ministry then reviews the application for a minimum of 48 hours - which in reality in Algeria can become a week - before passing the file onto the Ministry of Defence who then decide whether to allow the cargo to load.

"These new rules are creating a major problem for Sorfert and Fertial as it will reduce shipments of Algerian ammonia and urea, as well as the price. It is a complete nightmare and unless cargoes can load in the next few days there is every chance production at some ammonia plants will have to stop as there is no room to hold all the product."

A second market participant revealed the government is using legislation included in a 2011 decree to block any exports of products that could be used as "weapons". Why officials have only just started to enforce the rules is unclear, but ammonia is highly explosive when mixed with gas or air and urea can be converted into urea nitrate explosive through the use of nitric acid.

No-one from Algeria's Ministry of Energy or Ministry of Defence was available for comment on Thursday and it is unclear if the new rules are being applied to the country's vast hydrocarbons industry.

It is understood that OCI Nitrogen NV plans to load 15,000 tonnes of ammonia on the Navigator Galaxy this weekend for delivery to long-term customers in Europe, including a client in Spain. No-one from OCI was available for comment on Thursday.

The Dutch firm holds a 51% stake in Sorfert and state-run energy giant Sonatrach holds a 49% share. The plant is expected to produce 800,000 tonnes/year of merchant ammonia and 1.3m tonnes/year of granular urea for export once fully operational.

A joint venture between Spain's Fertiberia and state-owned Asmidal, Fertial was on target to produce 840,000 tonnes of ammonia in 2013 until natural gas curtailments were imposed in October in a move that forced the manufacturer to declare force majeure. Fertial exports around 80% of its ammonia output, with a record 750,000 tonnes exported in 2012.